Economies of Scale

• What's That? Ever bought a family-sized pack of chips instead of small individual packets? It's cheaper, right? That's because making things in bulk often costs less per item. Large firms produce stuff at lower costs compared to their smaller cousins.
• Real-World Example: Think of McDonald's! They can offer burgers at lower prices because they make billions of them.
• Will You See Lower Prices? Well, not always. If there's not enough competition, they might keep the savings and not lower the prices. Sneaky, huh? 🕵️

• What's That? Imagine you found a treasure chest in your backyard. That's what these big firms can get by dominating the market. They can make huge profits and keep them.
• Real-World Example: Apple! They make a ton of money by being unique and dominating the market.
• Why It's Cool? They can invest in Research and Development (R&D) and create innovative products and processes. More on that next!

• Who's This Guy? Joseph Schumpeter, a brilliant economist, argued that big firms with monopoly power must innovate to survive the relentless winds of "creative destruction."
• What's Creative Destruction? It's like a fierce storm that destroys the old and makes way for the new. If companies don't innovate, they can get blown away!
• Real-World Example: Remember Kodak? They got swept away by the digital photography revolution.